China as number 3?

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The latest OECD long term scenarios, released without much fanfare in September last year, suggest that India will overtake be the largest economy by the 2060, and will be almost twice the size of China by the end of the century (Figure 1). The USA, which is currently in second place, will slip to third place in the 2040s, but then catch up with China again in the 2070s, two centuries after it first overtook China to become the largest economy in the world in the 1870s. In the previous OECD scenarios released in 2023, the projection horizon was the year 2060, and China was then projected to still be the largest economy by then with a considerable margin. This is still just the case in the current projections, but the big changes occur in the second part of this century.What has changed?It is largely the changed demographics that make China slide in the ranks of GDP. With the new UN Population Division projections released in 2024, China’s population declines much faster than expected before, with most of the decline in the second half of the century. The median projection puts China’s population at some 650 million people by 2100. Even with a rise in labour force participation, China’s labour force, according to the scenarios, will be less than 300 million by the year 2100, and barely 40 percent of that of India, and not that much larger than the United States (Figure 2). India will have the largest population in the world by far in 2100, having only started its decline by 2060. More so, labour force participation is expected to rapidly increase, from some 50 percent of the…